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Is Sony Afraid Of Cloud Gaming?

Last summer Sony placed a big bet on cloud gaming with its purchase of GaiKai, an online-game streaming service for $380 million.

It was both a bold move and a bow to an inevitable future when video games will be streamed from the cloud to any device, just as Netflix streams movies and television shows today. While cloud gaming is only now starting to be offered to consumers, it will eventually grow big enough to threaten the market for consoles like the PlayStation.

In July Andrew House, president and group CEO of Sony Computer Entertainment, indicated that Sony would not sit around and wait for the console market to shrink. Instead, Sony would embrace cloud gaming. House promised “a world-class, cloud-streaming service that allows users to instantly enjoy a broad array of content ranging from immersive core games with rich graphics to casual content anytime, anywhere on a variety of interconnected devices.”

Last week’s launch of the PlayStation 4 revealed just how far Sony has backed away from that vision.

Visitors play Sony Computer Entertainment's game consoles A model at the Sony booth at the annual Tokyo Game Show in Chiba, suburban Tokyo, on September 20, 2012. (Image credit: AFP/Getty Images via @daylife)

Instead of integrating cloud gaming into the new console, a disruptive move that could have changed the dynamics of the game industry, Sony is using GaiKai’s technology to allow gamers to try a game for free before they buy it and to play a game while it downloads. Other features of the PS4 let a gamer stream a friend’s game and stream games that were made for earlier versions of the console.

These are nice capabilities, but they are not game changers. “It’s hard to see this indecision as anything but corporate cowardice,” Erik Sofge writes in Popular Mechanics.

Sony has reason to be afraid. During the quarter that ended in December, Sony’s gaming-related sales fell 15 percent to about $3 billion thanks to the lower hardware and software sales for the PlayStation 3. This is in line with broader industry declines.

From the standpoint of margins, it’s not in the interest of Sony—or any other major player in the video game industry—to accelerate the move to cloud gaming. If the video game industry follows the movie industry in its transition to digital streaming, profits will take a hit as consumer behavior shifts to renting games from owning them.

But that perspective may be short sighted. According to Gadi Tirosh, a general partner with Jerusalem Venture Partners and a member of the board of directors of Playcast, a cloud gaming pioneer, cloud gaming does not attract the hard-core gamers that rush to buy the latest consoles and console games. “The people we cater to are what we call mid-core gamers,” Tirosh explained. Based on usage patterns, subscribers to Playcast’s gaming channel appear to be families who get more value out spending $10 to $15 a month to play 20 games on a publisher’s back list than they would buying two or three new titles a year for a console that cost between $300 and $400.

Meanwhile, the shift in consumer behavior from renting to owning is likely to be slow. According to BTIG Group, consumer rental of home videos will outpace retail store sales for the first time since 2000 in 2013.

While the shift to cloud gaming will likely occur faster, it won’t happen overnight. Sony’s fear of cloud gaming may be a bigger risk to Sony than the streaming services themselves.

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I wouldnt call them scared. It makes sense. People already complained about OnLive because of bandwidth caps or just bad internet and they did the same thing when the PS4 was announced. Until the internets infrastructure can cater to these services, the way Sony is implementing the PS4′s features makes sense.

The largest thing current Playstation owners are upset with is Sony’s audacity in thinking we would be fine with “re-purchasing our content again” as they refuse to admit the extent of the damage the LV0 exploit has caused and instead make the PS4 NON-BC. This is NOT about the architecture change either, as ALL AMD chips have a very perfected Hardware Virtualization Layer that would handle the PS3 game transition just fine… this Double-Aught blast of data comes from many courses through AMD Partner Website on this very topic.

Yes people did save & stream data before cloud . Those things were called hard-disks Ytube etc etc . And now you a do it via Flash Drives & Micro SD .. Better 32 GB cost 20/30$

Though CLOUD Gaming is a good thing . But it goes against economic modl of consoles . Make consoles cost effective generate revenue by Over Priced Titles / Royalties .

Cloud Gaming beats his hegemony by making Titles Cheap . For Sony this equates to loss . As every-time they sell you a PS Sony is making a loss . PS costs more than the MRP ( Only Verified by Sony not Independent Sources)

Yes… SCEA tried to get us all to swallow they lost $300 per unit at the intial launch of the Playstation, now lets look at how many units were sold pretty much right out of the starting gate:

Within two months the US had sold over 1 million, as well as many in Japan and there were more elsewhare around the globe. So lets call it 2.5 million. That would mean that they lost AT LEAST $750,000,000. Are you freakn kidding me thinking Ill buy that as a real loss and they continued on as though it was fine?

Yes, They used the PS3 as a trojan horse for their Cell and Blu-ray business. They took that lost to establish themselves in both those markets. Cell Chip proved to become extremely hard to develop for game creators. So thats out. Blu-ray won out the hd disc war. Mainly because it was integrated into the system unlike Xbox360′s 200$ HDDVD addon. Things arent simple, there are reasons why companies lose money on their main product. Same way alot of iphone apps are free after months of costly developing. Its called the Gillette Model.

The biggest problem they would face would be matching internet signals… and lets face it, unless your lucky like my community to have affordable FTTH service (FIBER INTERNET)… you cant amaintain a signal that is equal in UL capacity as to DL capacity.

Such as XFinity can give you 100 Mbps DL but only 20 Mbps (and thats downhill on a windy day, lol). They have doubled both of those values recently, and only to select areas, but its un-balanced nature will NEVER provide for consistent, playable cloud games.

In theory, you only need 5 Mbps to do cloud gaming with a reasonable amount of lag. This probably won’t appeal to the hard core gamer, but it could end up being fine for more casual gamers who are “discovering” console games for the first time.

let me add one more thing. gaikai runs only in 720p and will never ever stream psx4 game demos. videos sure. gameplay NO! not happeninig. I don’t care if a few people were able to be fooled. this technology does not work today and wont for 10 years.

its also stupid as heck to play a demo of a game in 720p (using compression video) when its meant to be played in 1080p. it wouldn’t make psx4 games look great and tempt people to buy them in 720p.